The credit crunch might already have sown the seeds of the next house price boom, according to a report out tomorrow from the Centre for Economic and Business Research (CEBR).

A sharp fall in house building, with 20 per cent fewer completions forecast for 2008 and 10 per cent fewer in 2009, is likely to be one of the key factors in prices recovering by the end of next year.

The CEBR says average house prices should rise by 30 per cent between late 2009 and 2012, 'partly driven by the shortfall in housing supply that the reduction in completions will inevitably precipitate'.

The construction industry is responding to the near paralysis of the housing market via a sharp slowdown in housebuilding programmes, according to the CEBR's report.

The number of housing completions in the next year or so will be well below the government's targets for housebuilding over the next five years. The embattled construction sector, already hit by higher labour costs, falling equity values and rising costs of credit, will react to falling prices and dwindling transactions by putting development projects on hold. This shortfall in completions will be one of the key factors driving the housing market recovery from 2010.

These are the key findings from the CEBR's latest consumer and housing prospects report.

House prices, already falling in most areas of the UK, will decline by 15 per cent peak-to-trough from the end of 2007 to the middle of 2009. As the construction sector reacts, housing completions will fall well below the government's targets of around 185,000 per annum for England, to 141,000 in 2008, 134,000 in 2009 and 139,000 in 2010.

Richard Snook, an economist at the CEBR and one of the report's authors, said: 'The credit crunch caused a shock in the housing market and we are now seeing the second-round effects of falling confidence and a slowing economy.

'When prices have fallen in the past we have seen house building slow down quite quickly but take a lot longer to come back, which leads to demand outstripping supply.'

Ben Read, the CEBR's senior economist, said that the fundamentals of the housing market were still relatively tight. He added: 'Whilst the short-term prospects for the housing market look bleak ... the sharp drop in building completions will mean higher prices if and when the credit markets sort themselves out.

'The government will be concerned that with every year that passes it gets further away from its house building targets, and with developers unlikely to respond quickly when the market bottoms out, prices may recover more quickly than people imagine.'